MexECON Blog

December PMI Jumps to 54.0

Mexico's December purchasing managers index (PMI) for manufacturing jumped to a seasonally-adjusted 54.0, up from 52.3 in November.  The index now stands at its highest level since July.  According to the report, from Banco de México and the official statistics agency INEGI, the rise in December came entirely from the heavily-weighted subindexes on new orders and production.  The subindex on new orders increased to 56.1, after a reading of 54.2 in November.  The subindex on production rose to 57.2, up from 54.1 in the previous month.  In contrast, the subindexes on manufacturing employment and inventories fell modestly, to 50.9 and 50.7, respectively.  The subindex on supplier deliveries fell sharply to 48.0.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  The report for December therefore suggests Mexico's manufacturing sector is growing quite broadly.  The Mexican factory sector has been growing well throughout the current economic expansion, and the manufacturing PMI has averaged 53.0 over the last two years.  The PMI in December was comfortably above even that robust level.  The strong reading provides added confirmation that the pullback in activity during November was probably just a temporary setback caused by global uncertainties.  With recent data suggesting the U.S. economic expansion is finally gaining some traction, there is a good chance that Mexican exports and industrial activity will continue to grow well, though not as fast as early in the recovery.  The main risk to the current expansion is if the European debt crisis gets dramatically worse again or Asian economic growth slows too much further.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1112

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